Shocking Obama Spending Digging America Into Great Depression

We are beginning to learn that $12.8 trillion doesn’t last very long when it is being spent by corrupt politicians and idiot bureaucrats. It doesn’t seem to matter how much Obama has already spent or committed; he just has to keep spending more and more and more.

WASHINGTON – The Treasury Department said Monday it will need to borrow $361 billion in the current April-June quarter, a record amount for that period.

It’s the third straight quarter the government’s borrowing needs have set records for those periods.

Treasury also estimated it will need to borrow $515 billion in the July-September quarter, down slightly from the $530 billion borrowed during the year-ago period. The all-time high of $569 billion was set in the October-December period.

The huge borrowing needs reflect the soaring costs of the $700 billion financial rescue program and the recession, which is nearing a record as the longest in the post World War II period.

The slump has cut sharply into tax revenue and boosted government spending for benefit programs such as unemployment insurance and food stamps.

The administration is projecting the federal deficit for the entire budget year ending Sept. 30, will total a record $1.75 trillion. A deficit at that level would nearly quadruple the previous record of $454.8 billion set last year.

To cover the government’s heavy borrowing needs, Congress in February boosted the limit for the national debt to $12.1 trillion as part of the legislation that enacted President Barack Obama‘s $787 billion economic stimulus program. The national debt now stands at $11.1 trillion.

Not the first time we’ve seen insane spending, as a 1934 Chicago Tribune cartoon would illustrate:

But FDR never dreamed of the MEGO numbers (“My Eyes Glaze Over”) that we are facing today.

What is it those little notes on the out-of-control wagon say?

“Depleting the resources of the soundest government in the world.”

“Spend! Spend! Spend – Under the guise of recovery. Bust the government – blame the capitalists for the failure – junk the Constitution and decree a dictatorship. “

And the figure of Stalin says, “How red the sunrise is getting,” to denote the communist mindset that such levels of government spending and control over the economy entails.

The Tribune cartoon was drawn in 1934. The Great Depression – in testament to the folly the artist was pointing out – would continue to drag on for years afterward. FDR’s “solutions” didn’t solve the crisis; they prolonged the suffering.

Michael Boskin described the radical extent of the Obama socialist spending in The Wall Street Journal (the newspaper people are actually willing to buy):

It’s hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president’s policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis.

The illusion that Barack Obama will lead from the economic center has quickly come to an end. Instead of combining the best policies of past Democratic presidents — John Kennedy on taxes, Bill Clinton on welfare reform and a balanced budget, for instance — President Obama is returning to Jimmy Carter’s higher taxes and Mr. Clinton’s draconian defense drawdown.

Mr. Obama’s $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents — from George Washington to George W. Bush — combined. It reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history. And it would raise taxes to historically high levels (again, relative to GDP). And all of this before addressing the impending explosion in Social Security and Medicare costs.

Many liberals stubbornly cling to the thesis that FDR’s policies brought America out of the Great Depression. And they can cite a boatload of leftist historians who have come to precisely that conclusion.

But I would submit that anyone taking that position must refute Franklin Delano Roosevelt’s VERY OWN TREASURY SECRETARY.

“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong… somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises… I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot!” – Henry Morgenthau, FDR’s Treasury Secretary, May 9, 1939

We are spending FAR TOO MUCH MONEY, and we’re spending it on the wrong things. We are repeating the worst mistakes of the Great Depression, and are very likely doomed to repeat the consequences of our failure to learn the lessons of history.

The fact of the matter is that ignoring defense spending was a hallmark of FDR, too. In spite of the growing and building threat of both the Nazis and the Japanese Imperialists for YEARS, FDR spent massively on virtually everything BUT defense spending. Which is why we were so woefully unprepared for hostilities following the Pearl Harbor sneak attack that inexcusably caught us completely off guard.

Getting back to Reagan, one is forced to only imagine how many American lives would have been saved if we’d had a Reagan rather than a socialist-spending FDR serving as President; and we’d gone into World War II with the mightiest military machine in the world rather than with the 2nd rate joke we were forced to begin with.

And thanks to Obama’s massive defense cuts one may be forced to wonder about how many lives we could have saved all over again as he slashes our military rather

In many ways, FDR and BHO are images of one another. Both men were skilled politicians with great oratorical skills (providing Obama has a teleprompter, anyway). Both men had never had a single success of their own in business. And both had the completely wrong idea of what was wrong with the national economy, and what needed to be done to get it back on track.

The one difference is this: FDR foolishly caused America to REMAIN in the Great Depression by zealously pursuing failed policies; BHO will foolishly force America INTO the next Great Depression by zealously pursuing the SAME failed policies that never worked for FDR.

You are incredibly wrong, Jean. And its because of the ignorance of history of people like you that we will very likely repeat the history of the Great Depression.

Let me begin with the words of FDR’s OWN TREASURY SECRETARY, Henry Morganthau:
“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong… somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enought to eat. We have never made good on our promises… I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot!” – Henry Morganthau, FDR’s Treasury Secretary, May 1939

He said this after everything that FDR had done had actually led to worse unemployment and worse economic production than he had encountered when he came in.

Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.

After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”

In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.

“President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services,” said Cole, also a UCLA professor of economics. “So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies.”

Using data collected in 1929 by the Conference Board and the Bureau of Labor Statistics, Cole and Ohanian were able to establish average wages and prices across a range of industries just prior to the Depression. By adjusting for annual increases in productivity, they were able to use the 1929 benchmark to figure out what prices and wages would have been during every year of the Depression had Roosevelt’s policies not gone into effect. They then compared those figures with actual prices and wages as reflected in the Conference Board data.

In the three years following the implementation of Roosevelt’s policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.

Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.

“High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns,” Ohanian said. “As we’ve seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market’s self-correcting forces.”

The policies were contained in the National Industrial Recovery Act (NIRA), which exempted industries from antitrust prosecution if they agreed to enter into collective bargaining agreements that significantly raised wages. Because protection from antitrust prosecution all but ensured higher prices for goods and services, a wide range of industries took the bait, Cole and Ohanian found. By 1934 more than 500 industries, which accounted for nearly 80 percent of private, non-agricultural employment, had entered into the collective bargaining agreements called for under NIRA.

Cole and Ohanian calculate that NIRA and its aftermath account for 60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943.

Roosevelt’s role in lifting the nation out of the Great Depression has been so revered that Time magazine readers cited it in 1999 when naming him the 20th century’s second-most influential figure.

“This is exciting and valuable research,” said Robert E. Lucas Jr., the 1995 Nobel Laureate in economics, and the John Dewey Distinguished Service Professor of Economics at the University of Chicago. “The prevention and cure of depressions is a central mission of macroeconomics, and if we can’t understand what happened in the 1930s, how can we be sure it won’t happen again?”

NIRA’s role in prolonging the Depression has not been more closely scrutinized because the Supreme Court declared the act unconstitutional within two years of its passage.

“Historians have assumed that the policies didn’t have an impact because they were too short-lived, but the proof is in the pudding,” Ohanian said. “We show that they really did artificially inflate wages and prices.”

Even after being deemed unconstitutional, Roosevelt’s anti-competition policies persisted — albeit under a different guise, the scholars found. Ohanian and Cole painstakingly documented the extent to which the Roosevelt administration looked the other way as industries once protected by NIRA continued to engage in price-fixing practices for four more years.

The number of antitrust cases brought by the Department of Justice fell from an average of 12.5 cases per year during the 1920s to an average of 6.5 cases per year from 1935 to 1938, the scholars found. Collusion had become so widespread that one Department of Interior official complained of receiving identical bids from a protected industry (steel) on 257 different occasions between mid-1935 and mid-1936. The bids were not only identical but also 50 percent higher than foreign steel prices. Without competition, wholesale prices remained inflated, averaging 14 percent higher than they would have been without the troublesome practices, the UCLA economists calculate.

NIRA’s labor provisions, meanwhile, were strengthened in the National Relations Act, signed into law in 1935. As union membership doubled, so did labor’s bargaining power, rising from 14 million strike days in 1936 to about 28 million in 1937. By 1939 wages in protected industries remained 24 percent to 33 percent above where they should have been, based on 1929 figures, Cole and Ohanian calculate. Unemployment persisted. By 1939 the U.S. unemployment rate was 17.2 percent, down somewhat from its 1933 peak of 24.9 percent but still remarkably high. By comparison, in May 2003, the unemployment rate of 6.1 percent was the highest in nine years.

Recovery came only after the Department of Justice dramatically stepped enforcement of antitrust cases nearly four-fold and organized labor suffered a string of setbacks, the economists found.

“The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes,” Cole said. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”

Folsom points out that as long as the mythology surrounding the New Deal remains intact, he notes, “the principles of public policy derived from the New Deal will continue to dominate American politics” (p. 15), costing Americans billions of dollars and further damaging the economy. The facts Folsom marshals is a dagger through the heart of any assertion that FDR’s government intrusion did anything other than hurt the economy and prolong the suffering of the Great Depression.

In light of our improved understanding of economics, the verdict is rather clear that FDR damaged and undermined the economy with his government takeover.

Furthermore, we’re seeing the same failure all over again. Look at Cash for Clunkers. Conservatives predicted it would be a giant failure (see the Wall Street Journal here), and it has been. Car sales have completely crashed, just as conservatives said. People didn’t buy new cars waiting for the government doll, or merely hastened purchases they already were planning to make. The $4 billion program merely wasted money, created another avenue of government intrusion, destroyed cars that the poor would want/need, added a further hardship to the car maintenance/repair small businesses, and even further hurt the poor by dramatically undermining car donations that many charities relied upon to help the poor. Government screwed up yet again, to continue a perfect record of failure whenever they try to dictate their will upon the economy.